7 ms·

What are regulatory credits? I thought the 7500 credit ran out?

elil17 6y ago
This is separate from the consumer EV tax credit. Every car manufacturer must produce a certain percentage of electric cars. If their actual EV sales aren’t enough to cover that requirement, they can purchase “EV credits” from companies that exceeded their regulatory requirements to avoid a fine. Essentially this policy gets car companies that aren’t producing EVs to subsidize the ones that are.
- michaelmior 6y ago
  Interesting! I wasn't aware of this credit. How it's structured is fascinating in that they essentially have to pay their competitors for not meeting the quota. (Of course the markets for EV vs ICE is somewhat different, but not disjoint.)
  - elil17 6y ago
    Yeah it’s an awesome system! Similar ideas exist for controlling carbon emissions (like a cap and trade system, where, to oversimplify it, everyone gets an equal amount of “greenhouse gas points” which you can either spend on polluting or sell to others)
    - mamon 6y ago
      Actually, this system is counterproductive, I think. Starting production of EVs costs you money, but it also takes time, and the penalties for not meeting quotas are something you have to pay right now. So, in the end, the money you spend buying "EV credits" is the money taken away from your R&D budget on EVs. You might argue that the company receiving money for "EV credits" would invest them in increasing the production, but that's often not the case - since they have already met their quotas and are off the hook, they are free to simply hand this money out to shareholders in form of a dividend.
  - Lendal 6y ago
    No, according to other commenters they would be paying it to the government anyway, if they weren't paying it to Tesla.
    - michaelmior 6y ago
      I don't understand your point. I was commenting that the fact that funds are going to their competitors is an interesting incentive structure.
- deleted 6y ago
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yakz 6y ago
The manufacturers can trade between each other, e.g. if GM sells mostly vehicles that are heavy polluters, they can buy an offset from Tesla whose product does not burn gasoline.
danans 6y ago
It's not the federal tax credit for purchasers, but rather the state ZEV credit which manufacturers trade. "California, and nine other U.S. states that have adopted its ZEV regime, require automakers that sell internal combustion engine-based vehicles to earn a certain number of ZEV credits every year by selling zero-emission vehicles. The credit requirement is typically determined by the number of vehicles that the manufacturer sells in the state. If an automaker doesn’t produce enough electric cars to meet its quota, it can choose to buy credits from other manufacturers who do or pay a $5,000 fine for each credit it is short." https://www.forbes.com/sites/greatspeculations/2017/09/01/teslas-lucrative-zev-credits-may-not-be-sustainable/#3af41c0c6ed5 https://www.forbes.com/sites/greatspeculations/2017/09/01/te...
sbahr001 6y ago
There are still state credits, just no federal. I also don't know if they selling carbon credits in this category or not.
deleted 6y ago
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antoncohen 6y ago
People have mentioned the US ZEV credits. But there are also EU emission pools. In the EU car makers have to meet an average CO2 emissions target across their fleet, if they don't they pay fines. Car markers can pool with each other. Tesla, with a lot of sales and zero emissions, is very valuable in a pool. FCA (Fiat-Chrysler) has paid Tesla to form an emissions pool with them. Here is a video about it: https://www.youtube.com/watch?v=PwXsY7IcrO8 https://www.youtube.com/watch?v=PwXsY7IcrO8

This is separate from the consumer EV tax credit. Every car manufacturer must produce a certain percentage of electric cars. If their actual EV sales aren’t enough to cover that requirement, they can purchase “EV credits” from companies that exceeded their regulatory requirements to avoid a fine. Essentially this policy gets car companies that aren’t producing EVs to subsidize the ones that are.

michaelmior 6y ago
Interesting! I wasn't aware of this credit. How it's structured is fascinating in that they essentially have to pay their competitors for not meeting the quota. (Of course the markets for EV vs ICE is somewhat different, but not disjoint.)
- elil17 6y ago
  Yeah it’s an awesome system! Similar ideas exist for controlling carbon emissions (like a cap and trade system, where, to oversimplify it, everyone gets an equal amount of “greenhouse gas points” which you can either spend on polluting or sell to others)
  - mamon 6y ago
    Actually, this system is counterproductive, I think. Starting production of EVs costs you money, but it also takes time, and the penalties for not meeting quotas are something you have to pay right now. So, in the end, the money you spend buying "EV credits" is the money taken away from your R&D budget on EVs. You might argue that the company receiving money for "EV credits" would invest them in increasing the production, but that's often not the case - since they have already met their quotas and are off the hook, they are free to simply hand this money out to shareholders in form of a dividend.
- Lendal 6y ago
  No, according to other commenters they would be paying it to the government anyway, if they weren't paying it to Tesla.
  - michaelmior 6y ago
    I don't understand your point. I was commenting that the fact that funds are going to their competitors is an interesting incentive structure.
deleted 6y ago
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yakz 6y ago

The manufacturers can trade between each other, e.g. if GM sells mostly vehicles that are heavy polluters, they can buy an offset from Tesla whose product does not burn gasoline.

danans 6y ago

It's not the federal tax credit for purchasers, but rather the state ZEV credit which manufacturers trade. "California, and nine other U.S. states that have adopted its ZEV regime, require automakers that sell internal combustion engine-based vehicles to earn a certain number of ZEV credits every year by selling zero-emission vehicles. The credit requirement is typically determined by the number of vehicles that the manufacturer sells in the state. If an automaker doesn’t produce enough electric cars to meet its quota, it can choose to buy credits from other manufacturers who do or pay a $5,000 fine for each credit it is short." https://www.forbes.com/sites/greatspeculations/2017/09/01/teslas-lucrative-zev-credits-may-not-be-sustainable/#3af41c0c6ed5 https://www.forbes.com/sites/greatspeculations/2017/09/01/te...

sbahr001 6y ago

There are still state credits, just no federal. I also don't know if they selling carbon credits in this category or not.

deleted 6y ago

[deleted]

antoncohen 6y ago

People have mentioned the US ZEV credits. But there are also EU emission pools. In the EU car makers have to meet an average CO2 emissions target across their fleet, if they don't they pay fines. Car markers can pool with each other. Tesla, with a lot of sales and zero emissions, is very valuable in a pool. FCA (Fiat-Chrysler) has paid Tesla to form an emissions pool with them. Here is a video about it: https://www.youtube.com/watch?v=PwXsY7IcrO8 https://www.youtube.com/watch?v=PwXsY7IcrO8